National Express may pay dividend

The group, which posted a 36 rise in half-year underlying profits to 75.7m, boosted margins in all but one of its divisions following a major efficiency drive under new chief executive Dean Finch.

The former Tube Lines boss joined the business five months ago in the wake of a disastrous period for the company's rail arm after it was forced to return its loss-making East Coast franchise to the Government in November.

At this stage last year, the East Coast deal sent the firm plunging into the red with a 48.1m bottom-line loss.

It made a profit of 24.5m this time and said it would resume dividend payments after a gap of more than a year if current trading performance is maintained.

Mr Finch said: "There remains much to do to deliver sustained business improvement across the group; however, we are pleased with our initial progress."

In the group's bus business – which operates in the West Midlands and Dundee – National Express is cutting driver wage costs and running routes more efficiently to save fuel costs.

Margins improved to 8.6 per cent from 6.8 per cent and limited a fall in operating profits to 10.9m, from 11.2m, after revenues dropped sharply due to the sale of its Travel London business.

Underlying revenues in the West Midlands reduced by one per cent as passenger volume growth was offset by a five per cent reduction in operating mileage.

Following the return of the East Coast service, National Express said its two remaining franchises – East Anglia and c2c, which serves London, Tilbury and Southend – performed well in the first half as rail profits improved to 16.1m from 2.5m.

Better central London employment and the impact of construction activity on the Olympic sites have benefited the franchises, which were recently extended while the Government carries out a review of the system.

The UK coach division, which includes its partnership with Eurolines, saw profits slip by 300,000 from last year's record of 10.6m.